Financial Plan Analysis 2012 and 2013

18 Pages • Essays / Projects • Year: Pre-2021

This plan is analyzing woolworths financial plan and provides strategies on how to improve each one. n 2012, for every $1 of liabilities, the business has 86c in assets. In other words, for every $0.86 Woolworths Limited has in assets, it owes $1 in current liabilities. In 2013, for every $1 of liabilities, the business has 91c in assets, which also means, for every $0.91 this business has in assets, it owes $1 in current liabilities. In both consecutive years, the current ratio is extremely similar as they both had a poor level of liquidity. They only differed by 5c of assets for every $1 of liabilities. It is shown that Woolworths Limited has struggled to pay for the current liabilities with their current assets but it may have been easier in 2013 due to the increase in the level of inventory in 2013.The inventory level of both years had the highest fund however it was not high enough to help pay off the debts in ease. It is evident that this is a poor ratio performance as the ideal current ratio is two times assets to liabilities (2:1), and in both 2012 and 2013, the current ratios is much below the ideal. However both ratios are generally acceptable in comparison to the industry average of retail, which is a ratio of about 0.6: 1, for example Myer’s (retail) 2013 current ratio is 0.91:1. On the other hand, Woolworths has operated successfully with a ratio less that 2:1 because the performance of the business in previous years shows that it has been successful. But in future years, this may be a risk, as creditors will prefer a high current ratio because it reduces the overall risk and therefore they may find it difficult to borrow and pay off their liabilities.

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